Crude oil futures were lower during mid morning trade in Asia Thursday pressured lower by a bearish report on US product inventory data while comments by Saudi Arabia and UAE on OPEC cuts helped to stall the price fall.
At 10:30 am Singapore time (0230 GMT), ICE March Brent crude futures were down 61 cents/b (0.99%) from Wednesday’s settle to $60.83/b, while the NYMEX February light sweet crude contract was 62 cents/b (1.18%) lower at $51.74/b.
According to data released by the US Energy Information Administration on Wednesday, US gasoline inventories and distillate inventories for the week ended January 4 had added 8.07 million barrels and 10.61 million barrels, respectively.
This was far higher than what analysts had expected or what the American Petroleum Institute had reported a day earlier. Although US crude inventories posted a decline last week, a 1.68 million barrel draw reported by the EIA fell short of API’s report of a 4.5 million barrel draw.
“The drawdown in [crude] inventory was less than expected,” ANZ analysts said in a note Thursday. The crude price drop were however stalled by positive news that emerged from Saudi Arabia and UAE, who reiterated OPEC’S commitment to reduce output. Energy ministries from Saudi Arabia and the UAE on Wednesday said that the oil market is on its way to rebalancing and that the 1.2 million b/d supply cut by OPEC and its allies will be sufficient in the first half of 2019.
“We took what I believe is a fairly strong decision in December in Vienna…to withdraw from the market the excess that was produced over the second half of 2018,” Saudi minister Khalid al-Falih said at a press briefing in Riyadh. “We estimate that 1.2 million b/d is more than sufficient.”
He pointed out that OPEC production had already fallen in December and that Saudi Arabia was prepared to lower output further in January to 10.2 million b/d. OPEC’s collective output fell 630,000 b/d in December to a six-month low of 32.43 million b/d, according to the latest S&P Global Platts survey. But the 11 members who have quotas for 2019 still need to reduce supplies by 950,000 b/d to become fully compliant with the deal, which went into force January 1.
“We have seen the correction in December, in January definitely we will continue correcting the market,” UAE minister Suhail al-Mazrouei said at the Gulf Intelligence UAE Energy Forum in Abu Dhabi. “Going forward, in addition to seeing OPEC+ implementation of the cuts, we believe the market wants to see those cuts have an impact on stocks. It may take some time to see stockdraws, so we are cautious on the near-term price outlook, “analysts from Societe Generale said in a note. As of 0230 GMT, the US Dollar Index was up 0.02% at 94.765. Platts.com
